Westinghouse Credit Corp. v. D'Urso, Docket No. 03-7368(L).

• Citation: 371 F.3d 96
• Decision Date: 08 June 2004
• Docket Number: Docket No. 03-7368(L).,Docket No. 03-7374(CON).
• Parties: WESTINGHOUSE CREDIT CORPORATION n/k/a CBS Corporation, Petitioner-Appellant, Westinghouse Electric Corporation, Bankruptcy-Movant-Appellant, v. Florence B. D'URSO, Trustee, as successor to Florence B. D'Urso, Executrix under the Last Will and Testament of Camillo Durso, deceased, Respondent-Appellee, Durso Supermarkets, Inc., Debtor, Chemical Bank, Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

371 F.3d 96

WESTINGHOUSE CREDIT CORPORATION n/k/a CBS Corporation, Petitioner-Appellant Westinghouse Electric Corporation, Bankruptcy-Movant-Appellant, v. Florence B. D'URSO, Trustee, as successor to Florence B. D'Urso, Executrix under the Last Will and Testament of Camillo Durso, deceased, Respondent-Appellee Durso Supermarkets, Inc., Debtor Chemical Bank, Defendant.

Docket No. 03-7368(L).

Docket No. 03-7374(CON).

United States Court of Appeals, Second Circuit.

Argued December 3, 2003.

Decided June 8, 2004.

COPYRIGHT MATERIAL OMITTED

John I. Karesh, New York, New York (John H. Eickemeyer, Dana H. Hoffman, Vedder, Price, Kaufman & Kammholz, P.C., New York, New York, of counsel), for Appellants.

Richard H. Dolan, New York, New York (Bennette D. Kramer, Schlam Stone & Dolan, LLP, New York, New York, of counsel), for Appellee.

Before: CARDAMONE, SACK, and JOHN R. GIBSON^*, Circuit Judges.

CARDAMONE, Circuit Judge.

This appeal concerns the calculation of interest. Crucial to its resolution in this case is fixing when the event takes place that separates pre-judgment from post-judgment time periods. The demarcation between the two periods occurs when a meaningful judgment is entered. The time when an event happens is important ordinarily because of the consequences that flow from it. When a meaningful judgment was entered has significance on this appeal for the same reason, i.e., because that is when post-judgment interest begins to run and pre-judgment interest ceases to apply. Unlike the time when a train departs its station or when the sun rises in the East — events that may be set out in a time-table or a schedule — the entry of a meaningful judgment requires a court to analyze the circumstances surrounding a judgment's entry in order to reach a legal conclusion supported by the evidence that establishes the time when such entry meaningfully occurs. We undertake that task in this opinion.

The appellants on this appeal — Westinghouse Credit Corporation and Westinghouse Electric Corporation — are now both part of Viacom, Inc. We refer to appellants collectively as Westinghouse. It appeals from an order of the United States District Court for the Southern District of New York (Stanton, J.) dated March 13, 2003. That order confirmed an arbitration award in Westinghouse's favor, but calculated interest on that award based on the statutory post-judgment interest rate, and applied that rate from the date of an earlier district court judgment that had been vacated on a prior appeal to this Court. Westinghouse contends the district court should have applied a higher interest rate during the period. Because we agree with this contention, we vacate the award and remand with instructions to the district court to amend its judgment so as to add to the award the correct amount of interest.

BACKGROUND

Most of the underlying facts are set out in detail on the earlier appeal in Westinghouse Credit Corp. v. D'Urso, 278 F.3d 138 (2d Cir.2002). For purposes of the present appeal, it is sufficient to recite the following: Florence B. D'Urso (Seller) sold all of the shares of Durso Supermarkets, Inc. (which owned 22 supermarkets) in 1989 for $44 million to T.F. Acquisition Corp. (Buyer). Id. at 141-42. Buyer obtained financing to make this purchase of Durso Supermarkets from Westinghouse, and paid the purchase price with a combination of cash and a note and mortgage. The contract covering this transaction called for post-closing adjustments to the purchase price, and part of the cash payment was placed in escrow to cover these adjustments. Id. The agreement further provided that disputes over post-closing price adjustments would be resolved through arbitration and directed that any resulting award was to be paid within ten days. Id.

In addition, the agreement contained specific provisions for interest calculations, the subject at the heart of this appeal, in the event that such an award was not paid on time. Section 2.04(c) of the agreement stated

If and in the event payment ... is not made on the due date, interest shall be added to the Amount Due, from the date payment was due to the date payment is made, at a rate computed by adding five percent (5%) per annum to the Prime Rate.

The parties agree that the prime rate specified under this section is a fixed yearly rate of 10.5 percent, and therefore the interest to be added to the amount due was 15.5 percent per year simple interest (5 percent plus 10.5 percent prime rate).

After the transaction closed, Ms. D'Urso as the Seller calculated the price adjustments and determined that the Buyer had paid her more than was owed under their contract. Accordingly, she returned to Buyer a check for $190,302.70. Id. at 143. Buyer contended that it was owed even more money for the closing adjustments. But Buyer had defaulted on payments owed Seller and had filed for bankruptcy before the closing adjustments dispute could be resolved. Because Westinghouse was Buyer's secured creditor, the bankruptcy court permitted it to prosecute Buyer's post-closing price adjustment claims on Buyer's behalf. Seller demanded that these claims be arbitrated, as called for in the contract, and she successfully moved the district court to withdraw the reference of this claim to the bankruptcy court and instead order arbitration. Id.

In 1998 following arbitration, the arbitrator awarded Westinghouse $2.3 million on the post-closing price adjustment claim it was prosecuting as a secured creditor of the Buyer. Id. at 144. In the meantime, Seller had obtained two judgments against Buyer based on other claims Ms. D'Urso had arising out of the sale of Durso Supermarkets. Id. at 143. Seller sought to use these two judgments as a recoupment or setoff to satisfy the arbitration award in favor of Westinghouse. Id. at 144. When Westinghouse petitioned the district court to confirm its arbitration award and to direct that the parties' escrow account be used to satisfy it, the district court confirmed the award, but agreed with Seller's setoff argument. It therefore directed the escrow agents to pay the entire escrow fund to Seller rather than to Buyer. Id. That decision, which formed the basis of a judgment dated June 2, 1999 was the subject of the previous appeal in this Court. The issue we addressed on that appeal was whether Seller was entitled to satisfy and extinguish the arbitration award by recoupment or setoff against Seller's other judgments. Id. We held that Seller (Ms. D'Urso) was not so entitled. Thus, we vacated the judgment and remanded the case to the district court. Id. at 150.

On remand, the district court ruled on the only contested issue remaining, which was the calculation of interest. In an order dated March 13, 2003, it held that interest should be calculated using the purchase agreement rate of 15.5 percent per year from the day after the arbitration award was due — August 1, 1998 — up until the day on which the district court had rendered its earlier judgment confirming the award — June 2, 1999, a period of ten months. It further decided that interest should be calculated at the post-judgment interest rate dictated by 28 U.S.C. § 1961 (a lower rate than 15.5 percent) between June 2, 1999 (the date of the district court's earlier judgment) and the date of payment. The district court then rendered a new judgment in which it confirmed Westinghouse's arbitration award and directed the escrow agents to pay that amount plus the specified interest to Westinghouse. This new judgment was dated March 28, 2003, and payment of it was effected on the same day.

DISCUSSION

Section 1961 of Title 28 provides a uniform rate at which post-judgment interest is to accrue on civil money judgments recovered in federal district court. It is undisputed that if the district court was correct in applying the § 1961 rate, and if it was correct in applying it from June 2, 1999, then it was also correct that the precise rate mandated by § 1961 was 4.879 percent per year (computed daily and compounded annually). But Westinghouse contends that the § 1961 rate should not have applied because the parties had agreed in the purchase agreement to a higher yearly rate of 15.5 percent interest. Alternatively, Westinghouse urges that the district court should not have applied the § 1961 rate commencing on June 2, 1999 because judgment had not been meaningfully ascertained at that time.

I Standard of Review

We have not had occasion to establish the standard under which a district court's award of post-judgment interest under § 1961 is reviewed. That standard we now hold is de novo. We recognize that interest awards are ordinarily said to be subject to an abuse of discretion standard. But such language appears only in cases where the statute commits those awards to the district court's discretion. See, e.g., Commercial Union Assurance Co. v. Milken, 17 F.3d 608, 613 (2d Cir.1994) (reviewing pre-judgment interest awarded under federal law). In contrast, we have not limited review to the abuse of discretion standard in cases where the governing law made an award of interest mandatory. See, e.g., Indu Craft, Inc. v. Bank of Baroda, 87 F.3d 614, 617 (2d Cir.1996) (reviewing pre-judgment interest awarded under New York law).

There is no question but that the post-judgment interest awarded in this case was mandatory under § 1961. That section states: "Interest shall be allowed on any money judgment in a civil case recovered in a district court." 28 U.S.C. § 1961; see Lewis v. Whelan, 99 F.3d 542, 545 (2d Cir.1996) (stating that interest awarded under § 1961 is mandatory; Carte Blanche (Sing.) Pte., Ltd. v. Carte Blanche Int'l, Ltd., 888 F.2d 260, 269 (2d Cir.1989)) (same). Further, our review of this award hinges on statutory interpretation. These factors militate in favor of de novo review. Cf. BP Exploration & Oil Co. v. Maint. Servs., Inc., 313 F.3d 936, 947 (6th Cir.2002) (reviewing post-judgment interest award de...